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Indonesia 2008

Indonesia 2008

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Published by: Adhityani Dhitri Arga on Jan 27, 2012
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03/31/2014

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The ASEAN has adopted the EURO 2 standard as a minimum fuels specification
standard for vehicles and most governments in the region have moved on to more
stringent EURO standards. In March 2006, the Ministry of Energy and Mineral Resources
(MEMR) issued the Decrees of Directorate General of Oil and Gas Nos. 3674 and
3675/24/DJM/2006 regarding Standard and Quality (Specification) of Oil Fuel of the
Type of Gasoline (and of Diesel) which is Marketed Domestically. It is on this basis
that Shell and PETRONAS, recent entrants to Indonesia’s petroleum retail market,
are selling high specification vehicle fuels in Indonesia. However, most vehicle fuel in
Indonesia does not meet this standard and does not meet EURO 2 standards.

Indonesia has banned the use of lead in gasoline. Unleaded petrol of international
specification is available and this enables the import of new cars with exhaust catalytic
converters.

63-76 - chapitre 4.indd 70
63-76 - chapitre 4.indd 70

24/10/08 16:41:39
24/10/08 16:41:39

© OECD/IEA, 2008

IV. ENERGY AND ENVIRONMENT - 71

The State Ministry of the Environment carries out regular surveys of gasoline and
diesel quality, including sulphur levels. These surveys reveal that sulphur content of
diesel in Indonesia varies across the country and appears to be deteriorating. Sulphur
is a direct hazard to health and is an important contributor to particulate emissions.

The permitted level of sulphur is 3 500 ppm, although it seems that products below
this standard are occasionally sold: some areas like Jakarta, Palembang and Batam
are supplied with fuel with a sulphur content of 1 000 ppm. This remains very high
compared to prevailing international standards which are generally 50 ppm and less.
10 ppm is critical for allowing the introduction of advanced emissions control systems
(like particulate filters) on diesel vehicles.

Sulphur concentrations in middle distillates can be reduced by blending with low
sulphur products, or by hydro treatment of gas oil streams in the refinery, or by catalytic
cracking of fuel oil. The simplest option is to import low sulphur distillate. A study in
Pakistan6

concluded that the cost of reducing Pakistani diesel sulphur content from 1.0%
(10 000 ppm) to 0.5% (5 000 ppm) in this manner would be USD 0.003/litre. Hydro
treatment is the most straightforward approach within the refinery, while the cracking
of fuel oil is a major undertaking which would not be performed solely to reduce the
sulphur content of middle distillates. At present, sulphur reduction is not an attractive
option for the Indonesian refinery sector, because until recently there was no technical
requirement in the market for low sulphur products. Even now there is only a premium
in a small market segment. The internal rate of return does not pass investment hurdle
rates, so raising finance via commercial channels (including international investment) is
not possible. Assigning sulphur abatement a value and internalising the damage costs
through a national standard would change this picture.

Part of the rationale for the development of Indonesia’s biofuels programme is to
lower sulphur emissions in transport by using biodiesel. A specification for biodiesel is
needed to ensure consumer confidence for its use. The National Standardisation Board
has affirmed the standard for biodiesel and the Directorate General of Electricity and
Energy Utilisation will co-ordinate with the Directorate General of Oil and Gas to
implement the standard through regulation.

While the older gasoline fuelled vehicle fleet in Indonesia uses an octane of 88 RON
(i.e., subsidised gasoline known as Premium gasoline), newer vehicles generally require
an octane of at least 91-92 RON to operate optimally. Most of the supply has a largely
sufficient octane number to meet the requirements of both vehicle fleets. Sampling by the
Ministry of the Environment in 2005 revealed only occasional drops below 88 RON.

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